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Are prices centrally decided in Marxism?

If so are they based on labour value?

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    In a Marxist-Leninist economy, yes. In the marxist analysis of capitalist societies, no. What have your researches yielded so far ? – Evargalo Sep 11 '18 at 12:21
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    I don't think Marxism is clear about the level of accepted centralism. The example presented for Marx's "dictatorship of the proletariat" was the Paris commune which tended towards decentralization but he also mentioned an idea of centralized revolutionary government. The value of a product is indeed based on labour, namely as is described in the Labour Theory of Value. – armatita Sep 11 '18 at 12:47
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    Are you asking about how this works in Marxist philosophy, or how countries which call themselves Marxist decided prices? Do you want theory or practice? – indigochild Sep 11 '18 at 14:56
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    @armatita - the most amusing part is that LTV is where Marx agreed with Adam Smith. – user4012 Sep 11 '18 at 17:43
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    @indigochild I guess I want the theory. If the price is based on Labour then can I sell very expensive shoes by simply saying they take a long time to make? Also, if I make shoes that involve a rare and skilful process to make, but that can be made rapidly, am I “permitted” to sell them for a high price because of the difficulty of finding people with the skill to make them? – Ben Sep 11 '18 at 18:04
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I'm not sure if you are asking about theoretical Marxism as espoused by Marx himself (this is covered in detail in Labor Theory of Value Wikipedia page, no need to elaborate here), or in Marxism-derived socioeconomic systems like USSR. Since Wikipedia answered the former, I will address the latter.

Libertarianism.com well-referenced article "A World without Prices: Economic Calculation in the Soviet Union" explained at high level how Soviet economy worked, at both production level, wage level, and retail price level. On the last one:

Prices of retail goods were determined in a similar fashion (to wages and production). Gosplan, knowing the total amount of money going towards wages (described earlier in the article) and therefore the amount of money available for consumption, would take that amount and set it equal to the value of all the goods that were to be produced that year according to their plan. From there, Gosplan could set the price of every good, again typically relying on the labor theory of value, the sum total of which would add up to the total of workers’ wages. In this way, Gosplan kept rigid prices that ideally reflected the value of the labor required to produce it. Again, all transactions went through Gosbank.

Obviously, Gosplan being Gosplan, if you discount black market economy, the prices were indeed set centrally.

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    Another problem not mentioned in the article is that Gosplan reduced the economy to a big linear programming problem, but their computers could not handle all the necessary variables. Hence "steel pipe" was considered as a single commodity, ignoring the fact that different sizes of pipe cost different amounts to produce. This led to an oversupply of cheaper sizes and undersupply of more expensive sizes as pipe factories raced to fulfil their quota. – Paul Johnson Sep 12 '18 at 8:54
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Not really - Marxism is not a way to run the economy or society. To quote wikipedia: "Marxism is a method of socioeconomic analysis". I think it is a very common mistake to identify Marxism with later attempts at constructing ideologies based on this analysis; allegedly he wasn't himself all that impressed with the results - he is supposed to have said something like "If that is Marxism, then I am not a Marxist".

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    Except, he was not referring to any Marxist country at the time, but rather, to a pamphlet over which he disagreed with the authors. marxists.org/archive/marx/works/1880/05/parti-ouvrier.htm – user21424 Sep 11 '18 at 16:49
  • Ah, I see - I must have overlooked that in the original question, then. – j4nd3r53n Sep 12 '18 at 7:35
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There are at least three reasons why prices aren't centrally-fixed and why you can't artificially increase the value of your shoes by spending more time producing them:

  1. Under communism the state will wither away, leaving no one to centrally create prices.
  2. Under communism there is no surplus value, so the price of your shoes is going to be the same as the use-value (the utility they provide to the wearer).
  3. If you try to artificially increase the price of your shoes by spending more time on them, you won't find a buyer.

No, because a communist state would not have a state.

Although some countries using Marx's name have used central planning to determine prices, Marx himself did not advocate this idea. Marxist theory (starting at least with Friedrich Engels, though he attributed the idea to Marx himself) predicted that the communist world would not have a state. Without class antagonism it would wither away and die in obscurity.

Without a state, it isn't clear who would set prices.

Wikipedia has a summary of this idea here.

If you can find access, a fine article was published in the Journal of the History of Ideas here. That article pursues different dimensions of the withering away of the state. In particular, after the state is gone some minimal administrative organ may remain. What exactly this is supposed to be isn't clarified in Marx's work.

No, because surplus value is minimized in communism.

Marx differentiated between two forms of value: exchange value and use value [short write-up from Iowa State University here].

Use value is based on how useful something is. Your theoretical shoes have use value based on their durability, size, and other features. In some sense, this is the "true" usefulness of a thing, regardless what the price at market was.

Exchange value is the value something has on a market, as determined by the buyer and seller. Marx was critical of exchange value, because it is a distorts the value of a thing. He observed that exchange value is often more than the use value, and the extra value (in the form of profits) are retained by bourgeoisie, creating a kind of feedback loop of repression: the bourgeoisie extract value from the workers, and then use their fictional extra value to enhance their ability to extract value from workers.

It also distorts values in the opposite direction: when the exchange value is below the use value, the item is not produced (or under-produced) in capitalism, because no firm would spend the money to produce something they couldn't sell for more.

In communism, surplus value is minimized: the market price of goods is similar to their use value. The mechanism here is really marketing: under capitalism goods are produced for the bourgeoisie based on the surplus value that can be extracted. Without the need to generate profits for the bourgeoisie, the two values are the same.

In your case, no matter how much labor your shoes took to create, their value will only ever be their use-value.

No, because your shoes are not a commodity.

Marx also differentiated between a commodity and product. Commodities are traded on a market, while products are not.

If you spend twice as much labor producing a pair of shoes than is necessary for its features, than you aren't going to be able to trade it at the price that it's labor suggests. No one would take that offer, and your labor will have amounted to nothing.

You will have to settle for the price of other shoes with the same features, even though they took less labor to produce. In this case, you probably over-estimated the value of your own labor. You added additional labor, but didn't realize additional use-value as you did so.

Now, if your shoes fill some need in society, that extra labor may be justified and you can get the price you want. But that's because those shoes have additional use-value, not because of the labor exerted on them.

These two quotes from Marx describe the different between products and commodities. Read more in the same section to get some of his ideas on markets, surplus value, and labor:

To produce a commodity a certain amount of labour must be bestowed upon it, or worked up in it. And I say not only labour, but social labour. A man who produces an article for his own immediate use, to consume it himself, creates a product, but not a commodity. As a self-sustaining producer he has nothing to do with society.


But to produce a commodity, a man must not only produce an article satisfying some social want, but his labour itself must form part and parcel of the total sum of labour expended by society. It must be subordinate to the division of labour within society. It is nothing without the other divisions of labour, and on its part is required to integrate them.

[Source: Value, Price, and Profit]

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    So the use-value of a plain sturdy black pair of brogues is their size, durability and grip on the ground. But a pair of Dolce and Gabanna black leather shoes also have élan, which to me is valuable. The Dolce and Gabanna shoes are therefore worth more to me, and therefore the seller will be able to get a better price. Is this possible under Marxism? – Ben Sep 11 '18 at 20:42
  • @Ben In my understanding, yes. That design produces additional usage for you, so it's worth more (to you). But it doesn't automatically become valuable because someone spent more time making it. – indigochild Sep 11 '18 at 20:49
  • Thank you. You also mention that under communism surplus value is minimised. So we have price differentiation based on subjective value (I value élan, you might be happy with sturdy brogues) and we have an optimisation function at work to avoid over-delivery. That sounds like a capitalist market? – Ben Sep 11 '18 at 20:58
  • @Ben It sounds like a market, but not a capitalist one. Marx's world has markets where people exchange goods according to supply and demand. The difference is that there is no price distortion due to capitalist's need for profit (what he calls "surplus value"). In my understanding, that means the price always reflects the use-value (which as you pointed out, is subjective). – indigochild Sep 11 '18 at 21:12
  • @Ben we can open up chat to talk about this more if you like. There are a lot of interesting facets that came up while I was pulling together sources for this. – indigochild Sep 11 '18 at 21:12

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